The economy of St. Vincent and the Grenadines is expected to grow by 2 per cent in 2018, up from 0.7 per cent in 2017, the International Monetary Fund (IMF) said on Wednesday.
The economy is expected to expand by a further to 2.3 per cent in 2019, the Washington-based institution, further said, even as it said SVG continues to face challenges in sustaining the growth momentum over the longer-term.
The projected growth is driven by increases in tourist arrivals, tourism-related activities (including investment in hotels and resorts), and related local production, the IMF said on Wednesday after its annual Article IV consultation.
“Beyond 2020, growth would be sustained at around 2.3 percent, assuming steady tourism and investment growth,” the IMF said.
It said the outlook is subject to both external and domestic risks.
“External risks include weaker-than-expected global growth, tighter global financial conditions, and higher oil prices.
“Domestic risks include more severe and frequent natural disasters and the loss of correspondent banking relationships.
“There is also upside potential stemming from stronger-than-expected tourist arrivals, investor interest, concessional financing for capital projects, and the successful completion of the geothermal power plant.”
The IMF said the closure — since December 2016 — of Buccament Bay Resort — the largest hotel on St. Vincent and heavy rains with flooding and landslides slowed down growth in the second half of 2016 and early 2017.
The government recently announced that it has reached a deal with local and foreign investors to take over and manage the hotel, signally that it should reopen by next year.
“Following the opening of the new airport, however, tourist arrivals have recovered, boosting tourism-related services (such as hotels, restaurants, and retail),” the IMF said, referring to Argyle International Airport, which began operating in February 2017.
“Increased demand for reconstruction materials from Dominica (struck by Hurricane Maria in September 2017) also helped the recovery.
“As a result, quarterly data show that output growth (year-on-year) has turned positive since the third quarter of 2017. Over the past year, inflation has remained around 2-3 percent.
SVG, nonetheless, continues to face challenges in sustaining the growth momentum over the longer-term.
“Like other Caribbean economies, its high exposure to natural disasters, a narrow production and exports base, and limited physical and human capital constrain potential growth. The mission focused on policies to achieve stronger and sustainable growth, build fiscal buffers, bolster resilience to natural disasters, and ensure financial stability,” the IMF said.